good friend and a good dad. from new york, good night, america. [captioning made possible by fox news channel] captioned by the national captioning institute ---www.ncicap.org--- bret: next, shimon perez discusses the prospects for peace with the palestinians. tough talk and preparation. we'll see what israel is doing about the possibility of a nuclear iran. the white house fires back after former vice president dick cheney says the president is playing politics with the c.i.a on healthcare legislation, top democrats scam bell to fill ted kennedy's open senate seat as top republicans call for starting over. all that, plus the fox

all-stars, "special report" live from jerusalem starts right now. welcome to jerusalem. i'm bret baier. we are on the mount of olives overlooking the temple mount. behind me, you can see the dome of the rock, the oldest existing islamic monument. below it, the western wall, or wailing wall, the holiest site for jews. with this as our backdrop, we begin with renewed prospects for peace talks between the israelis an plifns. here is white house correspondent wendell goler. >> months after meeting accept separately with the israeli and palestinian leaders, president obama is trying to bring them together to restart the middle east peace process. shimon perez announced the plan in an an exclusive interview with fox news channel. >> i think it will be the middle of september. the president obama will chair

it. there is a chance that we will decide to reopen negotiations. >> the meeting is timed to start with the u.n. general assembly meeting. while the white house won't deny it, there is no confirmation either. >> we are certainly hopeful that progress is being made. >> meanwhile, a new poll suggests president obama's star is falling among israeli jews, the number who consider him pro israeli is down 4% according to the jerusalem post t was 31% in may. >> right now, barack obama has an israel problem, and the fact is he's going to have to find a way to fix it, and that may well create another problem. >> mr. obama's numbers slumed after his june speech to the muslim world but the state department shrugged it off. >> the people in israel know who stands with them. >> former president bush was hugely p pro israeli but it was two and a half years into his

administration before he convened a middle east peace process, the 9/11 attacks providing a distraction and justification. president obama has condemned israel's continued settlement building and the israelis want to suspend it as a a pre-condition. some experts say they ought to negotiate with israel and the u.s. pressure takes away a bargaining chip. >> when the administration takes that role, we relieve arab parties from making their own concessions. >> with hamas still in control of gaza, president abbas can't negotiate for all palestinians. >> president abbas is presiding over what i would say is a palestinian humpty dumpty. the government of israel cannot and will not make peace with half of the palestinian national movement. >> miller also says there's no consensus among israelis on what concessions they're willing to make in exchange for peace. he calls next month's talks a galactic challenge. he says there will be real

consequences if the peace talks fail. bret. bret: wendell goler live on the north lawn. thank you. israelis are very skeptical of the latest report from the u.n.'s nuclear wash dog agency, reporting that iran has slowed down enrichment of nuclear fuel. israelis don't trust the u.n. and they trust iran even less. national security correspondent jennifer griffin gives us israel's take on when iran could have a nuclear weapon. >> how long will it take for iran to obtain a nuclear weapon? the c.i.a. and israel's spy agency have different estimates. >> the difference is a year or two years as a whole. the american estimation is three years. >> the obama administration wants to negotiate an end to iran's nuclear program, but israel's president told fox news his country has little faith that the u.n.'s nuclear watchdog can stop iran. >> so do you have any confidence

in the iaea or its head? >> no, i don't think so. you know, they didn't even discover that there was a nuclear danger in syria. facts are stronger than institutions, and institutions shouldn't lag behind the realities. >> and one of those realities, warns "the wall street journal," is that the moolas ruling iran have decided they have nothing to fear. quote, they've long concluded that the u.n. is no threat as iaea chief has become an apology man for iran's program and can see that the west lacks the will to do anything. on fox news sunday, former vice president dick cheney was asked why the bush administration didn't take out the iranian nuclear program. >> it wasn't my decision to make >> would you have favored military action?

>> i was probably a bigger advocate of military action than any of my colleagues. >> the latest iaea report notes iran has 300 fewer centrifuges than in june, and for the first time in three years, iran's output of enriched uranium is down, but no one knows why. >> i think iran has technical problems. they could be trying to calibrate centrifuges, thinking of how they're going to go forward. my read something that it is a technical problem and not a political gesture. >> all eyes are on israel. some worry israel may act alone militarily against a country that is viewed as an existential threat. bret. bret: jennifer given live at the pentagon. thanks. if iran develops the bomb, it already has the means to deliver it to israel. correspondent mike tobin tells us what the israelis are doing

about it. >> iran's nuclear program is coupled with aggressive development of ballistic missiles. having successfully tested solid fuel rockets, reaching tel aviv is now easy. iran can extend its threat to a significant portion of europe. >> look at the history. everybody wants a nuclear bomb and eventually have a bomb that goes at the top of a missile. >> israel has prioritized missile defense systems, moat notably the arrow and three months ago the arrow 2 was tested when an israeli fighter jet launched a blue sparrow missile at israel. the arrow knocked it out of the sky. >> it is harder to hit it in the missile. it is a slow target. >> other systems designed for short-range rockets serve as backup if the arrow does not intercept at a distance.

>> we are increasing measurably the chances of killing missiles on the way in. awhile israel weighs risks and rewards of striking iran's nuclear facilities, a former command chief says u.s. diplomacy can curb iran's ambition. russia, he said, can be wooed to turn air defenses into a coalition that suppresses. >> such a coalition does the job and the global system is going to be entirely new ball game. the global system is immediately become stable. >> mike tobin joins me live in jerusalem. mike, what would it take russia to join such a coalition? >> according to the israelis, bret, what the russians want is

for the u.s. to stop supporting the breakaway republic from the former soviet union like the ukraine, like georgia. beyond that, what the russians want to see is the u.s. shelf the american missile defense plan, the one that would involve u.s. missiles and radars based in eastern europe. bret: thanks. up next, the white house fires back at former vice president dick cheney. this is the old city market in east engineer engineer. this very populated area is actually broken up into four quarters, the muslim quarter, the jewish quarter, the christian quarter and the armenian quarter. the palestinians want east jerusalem to be their capital. see, this isn't just about politics. within one square mile there are religious sites that are extremely important to muslims, christians and jews, so who controls this very small area? has become the center of the conflict between israelis and palestinians.

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bret: welcome back. you are looking at jerusalem's old city there live. back in the u.s., on wall street today, stocks were down. the dow lost nearly 48 points, the s&p 500 gave back 8, and the nasdaq dropped almost 20. as america proceeds with what used to be call the war on terror, there is a war of words between the obama administration and the number two man from the previous white house. catherine herridge reports on the administration's reaction to dick cheney's verbal volley toward the president. >> the white house was critical and highly dismissive of mr. cheney. >> i think the vice president, if he watched some of his interview, was clearly had his facts on a number of things wrong. >> this response, after the former vice president was relentless in his criticism of the obama administration.

in an rain ter view with chris wallace on sunday. >> it is a terrible precedent plawvment cheney is referring to the decision by eric holder to investigate and possibly prosecute c.i.a. employees who acted outside of the approved interrogation tactics. >> it's a very, very devastating, i think, effect that it has on morale inside the intelligence community. if they assume that they're going to have to be dealing with the political consequences, and it is clearly a political move. >> a political move, because m cheney says this internal c.i.a. report declassified a week ago was reviewed by career prosecutors under the previous administration and only one case that a c.i.a. contractor went to court and was convicted on felony assault charges. career prosecutor john durham is leading the second resue. mr. cheney hinted he might not cooperate. if the prosecutor asks to

speak to you, will you speak to him? >> it will depend on the circumstances, and what i think their activities are really involved in. >> mr. cheney says his overwhelming view of the program, which included simulated drownings and unauthorized mock executions is that it prevented more executions on the scale of 9/11. mr. holder will decide to interrogate bin laden through some of mr. cheney's harshest comments> >> it moves in the direction of going back to looking at these the old way, as law enforcement problems, that this isn't a strategic threat to the united states. >> diane feinstein, chair of the senate intelligence committee, told cbs news that although she was or fied by the c.i.a. internal report, said "i wish the attorney general" saying it might get in the way of committee's work, and feinstein

said that persistent leaks about the program were not presenting the whole story. bret. bret: catherine herridge live in washington. thank you. the commander of u.s. and nato troops in afghanistan says a new strategy is needed to defeat the taliban. general stan stanley mcchrystal says the situation is critical but achievable. he sent his review to nato and the pentagon today. >> two u.s. service members were killed today in afghanistan ending the deadliest month since the war began in 2001. 4,000 troops have died totally. august had 2 more killed than any other previously month. >> in east jerusalem is a giant 30-foot concrete wall with barbed wire on the top. it stretches more than 436 miles, winding its way down,

separating israel and the west bank. it is roughly the same distance between washington and boston. it was constructed largely about four years ago after mour than 1,000 israelis died from palestinian suicide attacks. the israelis call this a security barrier. the palestinians call it a racial segregation wall because it lit alley splits neighborhoods in half. it does provide the security the israelis say they need, but it's not an agreed upon border that causes a lot of anger with the palestinians. geico's been saving people money on car insurance for over 70 years.

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bret: welcome back to jerusalem, a sacred and holy place to many religions. it is the centuries old conflict

at the middle of israeli troubles. when i spoke with shimon perez we talked about ending the impasse with the palestinians and the growing momentum toward a showdown with iran. >> we know that there may be a confrontation with squad squad. we know they are roop bluffing and that you cannot rely on them. if they go nuclear, there is a point of no return. how long does israel believe it will take iran to get a nuclear weaponen? >> the difference is a year or two years. the american estimation is three years. israel says it is shorter than that. >> what would you like to see western allies do to stop iran? >> clearly economic pressure. clearly diplomatic sanctions.

and, you know, there is one missing link and that is to pay more attention to the muslims. if they don't declare a nuclear war, then why do they need missiles to carry nuclear bombs? bret: if the u.n. security council does, best case scenario, move forward with some sanctions, how long can israel wait for those sanctions to work? >> well, i can't give you a date, but if it will be good enough, they will have an effect in a very short while. it will be loose and disorganized. it will be meaningless, so it depends upon the strength of the economic sanctions and effectiveness of it. bret: if it's not enough, is

israel prepared to act unilaterally? >> i think that israel must be very careful not to create the impression that iran is a danger only to israel. iran is a world of danger. israel shouldn't monopolize the danger. on our side, it is assured, but on the other side it will be considered before they take action. >> on a air trip a few hundreds yards away from the wall with ga gaza, president perez talked about the wall separating them from hamas. >> the palestinians have their own state. bret: yesterday a rocket was fired from there landing somewhere out here. >> yes.

there is an unwitten game between us and then. they are trying to open fire from underneath, and we have to discover the tunnels and prevent them from doing so. bret: so you have heard the accusations that during the gaza war that israeli troops used excessive force and that hundreds of civilians were killed. there are reports about that. how do you respond to all that? >> very simple, what would you do? you fire thousands and thousands of rockets, and people were killed, houses are destroyed. could you stop it otherwise? bret: what about the difficulty negotiating with the palestinians when they are split

in the west bank with fatah and in gaza with hamas? how do you do that? >> it's a very serious question you are asking me, and the answer is because of this split, we cannot have a solution in one answer. it is a split body. you cannot solve it with one step. we think the best bet for them and for us is to continue to build their economy, to continue to build their security, to take over the powers of the land that israel will provide to them. bret: there is talk that israel would freeze the construction of settlements going forward. is that going to happenen? >> this is one issue that is controversial and that is that the walls are in those settlements that exist. the israeli position is bringing to life children that are going

to kindergarten. there is not yet an agreement. negotiations are going long. i do believe there may be a resolution to it as well. bret: do you think it was right for the obama administration to lead off with the settlement issue? >> i think it would be right for the obama administration and for the palestinians to handle their whole set of steps, not to single out one, because if you single out one, the least important becomes the most important. bret: of all the priel ministers of israel, and you were one of them, do you think that benjamin netanyahu can deliver peace? >> i believe that benjamin netanyahu can do it. bret: in order to do it, this settlement issue has to be figured out. if you do freeze the settlements, aren't you going to

feel a lot of pressure from the right? >> it is very hard to convince your own people to make some concessions, but this is the task, to move ahead, and even though there is no chance, no escape, but we have to go ahead and make peace. bret: president perez talked about the west bank, and a new projection by the international monetary fund that says the gross domestic product there could reach 7%. >> instead of preaching to them what to do, this is and that, let's encourage them to do things. you see, by the way, this is a very special tree. it has the same trunk, and this is the fig. so the same tree can provide us

two different fruits. try it. it is not bad. bret: thank you. pretty good. >> it is beautiful. bret: two fruits from the same tree. perez says it could be a metaphor for two different groups of people living on the same land. meantime, the front pages here in israel today led with this story -- former israeli prime minister olmert has been indicted on corruption charges, accused of illegally accepting funds from an american banker as well as double billing for official trips abroad and pocketing the difference. he denies allegations. he stepped down as prime minister in the wake of the scandal last march. former homeland security chief tom ridge is contradicting his book publisher about whether he was pressured to change the threat level for political reasons. all this talk about settlements,

what is a settlement? we're standing in one not far from jerusalem. more than 30,000 israelis live in this settlement. a setsdelment is any israeli construction outside the nationally recognized border of israel. now the obama administration is demanding that all settlement construction be hat hatted in -- halted in order for the peation negotiation process to resume. the palestinians say israelis are build on land that they want to call the palestinian state. israelis say if you stop construction like this, it would stop the natural progress greg of life for the israelis who live here. the continental shelf. the continental shelf. natural gas can be a part of the solution. i think we need to work on wind resources. they ought to be carefully mapping every conceivable alternative. there is an endless opportunity right here.

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reactions contact your doctor immediately. wake up ready for your day-ask your healthcare provider for 2-layer ambien cr. bret: and now the latest from the political grapevine. a hamas spiritual leader says teaching palestinian children about the holocaust amounts to a war crime. cleric ewe niece astall ejects a u.n. approval to include information about the nazi killing of 6 million jews during world war ii. quote, i do not exaggerate when i say this issue is a war crime, adding that the holocaust teaching would be, quote, marketing a lie and spreading it." a senior israeli official says such statements should make the west think twice about ending its boycott of hamas. former homeland security chief tom ridge said he did not feel pressure from the bush

administration to raise the terror alert level ahead of the 2004 presidential election. ridge tells the erie times news that no one pressured him but officials expressed an opinion that ran counter to his. there was no pressure at all. it was just a judgment call on my part and their part. the publisher had released a comment suggesting that ridge was pressured to change the ter terror threat level for political purposes. ridge will be a guest on hannity at 9:00 eastern. the publisher of a las vegas newspaper is accusing harry reid of bullying by telling an employee of the review journal that he wants the paper shut down. sherman frederick calls out the democratic senator in sunday's paper alleging that the arc was made during a brief exchange between reed and the advertising director. fred frederick writes that he said "i hope you go out of business." the publisher minced no words in his response to reid saying such

behavior must be called what it was, a full-on threat perpetrated by a bully. reid's office did not respond to our request for comment. the governor of massachusetts today announced when a special election will take place to determine the successor to the late senator ted kennedy. the absence of the noted deal maker is seen by a blow to president owe baism ma's healthcare reform effort. steve brown reports on where that effort goes from here. >> i am designating, tuesday, january 19, 2010 as the date of the date of the speech elect. that date is almost five months away. we can't wait five months. we have to wait in the next few months to get this done by the end of the of the year. >> can you think of another issue that absolutely everybody is interested in?

healthcare. this is a big, big issue. >> today in kansas city, after touring children's mercy hospital, three republican senators, minority leader mitch mccon al, john mccain and kip bond of missouri told an invitation only audience healthcare reform is an issue that should be tackled. >> we have too many people not covered. >> we all want reform. we all want to reform the system. >> republicans also want to start from scratch. >> we ought to step back, start over, and target the individual problems that we know we have related to costs. >> focusing on costs, there might be right 'ems quickly agreed to like preventing insurance companies from denying coverage because of pre-existing conditions. just yesterday, john kerry from massachusetts and republican senator orrin hatch from utah made it sound like a compromise on malpractice suit limits could be hammered out. there are cases that deserve

huge awards, huge judgments. we have to find a way to get rid of the frivolous cases and most of them are. >> if there is an added motivation for democrats to compromise on healthcare, it is the august town halls. >> i think it is the first time i have come into a room where i had so many people boo me. >> the gatherings have been a a resistance to the healthcare fixes and with a week left until congress resumes business, the democratic chief vote counter says -- >> i'm not sure whether we can do this or not. we will try our best to put together a bipartisan effort. >> massachusetts governor duvall patrick wants special legislation to be named now, and it is not vicky kennedy, because she is not interested. bret: israel is keeping a suspicious eye towards iran despite a new report from the u.n. and while palestinian

negotiations may soon resume. this is the western wall, also known as the wailing wall. it is the oldest and holiest site for jews. it is believed that this wall is the only wall left standing from the original holy temple cox complex that was destroyed by the romans. millions of visitors come here every year to pray and celebrate. also, astra digs has it, they write down wishes on small pieces of paper and put them in the cracks of the wall. it is believed that god reads those wishes an answers them. we'll be right back. just ask my son.

>> i think we are going to meet by the end of of september. president obama will chair it. there is a chance that we will decide to reopen the

negotiations. i'm talking very frankly with benjamin netanyahu, which i think is the choice, because he knows there is no chance to escape, no alternative but to go ahead and make this peace. bret: shimon perez talking about a previously undisclosed meeting that is expected to happen at the u.n. general assembly gathering in new york later on in september, and when the white house was asked about it, robert gibbs said that he would not contradict our interview with president perez. he also said there is hope for progress as far as the settlement issue. what about all of this and also the developments on iran, israel and iran? let's bring in our panel. steve hayes with "the weekly standard", and juan williams and syndicated columnist charles krauthammer. charles, let's start with you in the bade i did bunch format here. what about this development on

the peace process and this meeting we didn't know b. >> it is more like hollywood scare squares. let's remember that for over a year, the previous prime minister of israel, ehud olmert had been negotiating with the head of the palestinians and made an astonishingly generous offer in december of '08, which the palestinians refused, as they always refused, so obama comes in, and instead of picking up and trying to get the palestinians to moderate, what did he do? he attacks netanyahu. he tries to make an issue of settlements, which had been in consensus. the u.s. and israelis had agreed no, new settlements, no new expansion of territory in settlements or dismantling of existing settlements. the palestinians never accepted negotiations for anything else. then obama, as a condition of don't construct a kindergarten

if children are born, which the israelis have rejected and all of a sudden the palestinians and arabs have said no negotiations until israel jumps through this higher hoop, so the arabs and palestinians have said we are not going to move. we're going to let obama extract unilateral concessions out of the israelis and that is why the process has stopped. >> i think that this is really great news, and i was impressed that, you know, that "special report" is able to break this story, because i think this is the story of a new epic potentially in some sort of middle east peace deal and it's necessary. to leave it as it is, the status quo, would be lamentable. history would have judged the obama administration as being neglectful on a key issue of our time, and of course it expands everything across the middle east, because it touches on a terrorist threat. it touches on iran. it touches on the safety of the world in terms of terrorist threat. let's take away this leapt, and

i think -- let's take away this element and you have an opportunity with the notion of talks opening in the fall. i think that the obama administration has been wise in this regard, you know, to say to the palestinians as well, you have got to come to the table willing to make sacrifices and compromises. the question is whether the difficulty between hamas and mahmoud abbas and who is exactly in charge of the palestinians, how will the obama administration handle it? you can't ask israel to negotiate with two sides of the same people, you know who, is the legitimate government of the palestinians? that is the real issue for me. >> well, i think juan is right that that is a major issue and an issue that could present a serious stumbling block but the most interesting thing to come out of your interview with president perez is this emphasis on the sunni state. you're reaching when you are talking about these coming negotiations, you got a point at which there is some common ground between israel on the one

hand and various sunni states on the other, quatar, dubai, united arab emeritus, saudi arabia, obviously being the biggest and most important one, on the question of iran and what happens to iran, and what seems to be potentially this emerging deal is a nine-month suspension of settlements with a natural growth settlement, which as charles points out gets us back to essentially where we were, and then in exchange, potentially having the u.s. put more pressure on iran, leading regional pressure on iran and potentially at the u.n. i think it's difficult right now for israelis to put much faith in barack obama and the united states actually doing anything on iran. we have seen what he has said repeatedly on iran, even at times when all that was required was a denuns yation of some horrible efforts on the streets of iran. he didn't do anything.

bret: charles, quickly on iran and israel's positioning to really practice, prepare for the possibility that iran becomes nuclear. did you hear anything in president perez's response that perked your ears? >> well, he is very much of a moderate. he reflects even the moderate and the left of israel. now, understand that israel will not accept a nuclear iran and will attack. that is absolutely unmistakable unless the world stops them. it is only a question of when. the only question is how long will they give the united states to actually help the program before israel acts? bret: all right. former vice president's criticism of the obama administration is making big news. we'll talk about that with the panel. we'll dissect it, next. (announcer) illness doesn't care where you live...

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>> i think it is an outage jus political act that had will do great damage long term to our capacity to be able to have people take on difficult jobs, make difficult decisions without having to worry about what the next administration is going to think. >> this is the same song and dance we have heard since the first day of my administration. i don't have a lot to say. bret, well, the fox news sunday interview with former vice president cheney made a lot of news but was not too well received at the white house. we're back at the panel for a little bit of reaction for this interview and the white house response. let's start with steve. >> well, i thought what you just saw was dick cheney very animated for dick cheney.

he clearly is fired up about this issue. one of the things that was most interesting that he talked about yesterday was the effectiveness of the techniques. we have seen, i think, a shift in public opinion, and certainly a leap in public opinion about whether they were effective because of the inspector general's report which is fascinating. you have a report that the left wing held up to be the critique of these techniques and in fact, we learned, inescapably have to conclude that the techniques were effective. there was an interesting story the night before the cheney interview in "the washington post" about how effective these techniques were. he made that case again sunday morning and made some news doing so. >> well, i don't know about the effectiveness, because in the same "washington post" story, khalid mohammed says to the red kos that he lied to the people who were torturing him just to get them to stop torturing him. that's what we know from that kind of technique. without a doubt, after he was subjected to this treatment, he started to sing more so than he

had ever done before. i don't think there is any question that this is about politics. i think vice president cheney is right there when he says, look, justice department officials looked into this previously and decided not to prosecute. the difficulty is at the moment he you have congressional committees launching their own investigation and that puts added pressure onto obama administration. >> i think there has been a shift in public opinion, and i think the ig report has reflected that quite strongly. look, the liberal position was inherently plausible. the position was enhanced interrogation, torture, if you like, doesn't work. intuitively everybody knows that everybody has a breaking point. then you get the report that tells new black and white that khalid shake mohammed said nothing of interest roar importance until he was subjected to the simulated drowning and sleep deprivation

and then he became a professor on al qaeda with a chalkboard, and then liberals have to say it's a coincidence that he didn't say anything before and spoke after? it's coincidence that there were no attacks in 8 years? cheney is winning on this because it is empiricly obvious that these techniques worked and saved many american lives. bret: well, steve, what about the vice president cheney factor? we saw the dueling speeches on that day a few months ago. is vice president cheney now becoming the most effective critic of president obama? >> well, i certainly think he is. i mean, you see how people respond and react, and particularly it drives the left wing in this country nuts. look, it helps to have the facts on your side. on this issue, the facts are fairly clear. this works. it has worked before and we have now seen evidence in the inspector general report of just how effective the techniques were. >> remember when we had the

dueling speechs? >> juan, any final words? >> we have a situation where vice president cheney's legacy is the man who says he protected america over that 8-year period. he feels president obama is undermining that legacy by saying he can do it without breaking the law, without torturing people. that would put the vice president's legacy in some question, and i think vice president cheney is trying to protect that political legacy again. i see this as highly political. i don't think there is any question about that if that's his point. bret: all all right, charles, tn seconds. >> that's because the bush- cheney administration dispersed and weakened the al qaeda group to a point we might be able to afford the soft treatment of the obama administration and get away with it. bret: i think that was nine. nicely done. that's it for the panel. stay tuned for the trials and tribulations of showing you jerusalem. .

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bret: finally tonight, we tried to give you a taste of jerusalem throughout this show show. we thought it added something to this show. but, frankly, on very little sleep it got a little frustrating at times. >> about 30,000 israelis come on by, 30,000 israelis. >> all construction be frozen freezed, something. bret: try it again. >> there are hundreds of israeli settlements of various sizes, and this guy roll on by. >> take it again. >> in less than a square mile, there are very -- yah -- >> issue. >> take it again. >> go and have a rest. >> i will. i will. thank you very much. bret: our special